Growing AI Concerns, Underwhelming Solar Earnings, and Other ESG News This Week

FactSet StreetAccount publishes regular company-level and summary-style ESG news. Below is our recap of key ESG developments and insights over the past week.

Chart of the Week – Themes From Earnings Reporters

• Q1 earnings season is in full swing; Figure 1 shows some of the notable thematic companies that have reported in the past week along with their week-to-date share-price change. In general, top-line revenue numbers have surprised to the high side, jibing with the theme of better-than-expected broad market Q1 results.

• Solar and wind company earnings have largely missed due to weak margins and share prices are near 52-week lows, though strong demand and orders have generally been cited in company conference calls.

• Elsewhere, Check Point Software highlighted macro concerns for cybersecurity names. Improved supply chain for components cited by Itron. Lithium producers Livent and Albemarle have performed differently depending on their pricing structure.

• For more company earnings analysis, please inquire about Street Takeaways publications through the StreetAccount banner below.

 Figure 1: Earnings and Price Highlights Week to Date

Source: FactSet, as of 2pm ET, May 4, 2023

Thematic Performance

Thematic sectors lower on the week with alternative fuels, energy storage and solar leading losses while environmental stocks, EVs and transition materials outperform. Aemetis leading alt fuel losses following Q1 miss. Energy storage declines led by US battery makers with Fluence and QuantumScape lower, the latter pivoting to smaller batteries in a bid to restore momentum.

US and European solar continues to underperform despite strong Q1 earnings from SolarEdge and SunRun. SunPower reported more mixed results amid NEM 3.0 headwinds in CA. In Europe, Otovo's Q1 earnings were in line though sales suffered from changes to tax credit scheme in Italy. US wind also lagging on TPI Composites following report of Q1 losses; European names faring better though some analyst concern over Orsted's unfavorable Q1 segment mix and continued cost headwinds for the sector.

Mixed views on lithium prices as Livent posted a Q1 beat and expects higher lithium prices this year whereas Albemarle lowered FY guidance after earlier price declines for the metal. APAC lithium miners broadly higher on the week; Ganfeng Lithium higher after reassuring shareholders it expects the Mariana lithium project to start production next year; IGO firmer after entering a nickel-lithium project JV with Venus Metals.

US EV makers outperforming this week with some smaller stocks (Workhorse, Sono Group, Faraday Future) experiencing a reprieve from recent losses. Tesla lower WTD as it slightly upped prices across markets following investor concern over cuts. Chinese EV makers seeing mixed performance with Li Auto and BYD reporting a jump in April deliveries year over year while Xpeng saw a decline.

Environment

The US Supreme Court took up a case challenging the Chevron doctrine; a decision could further restrict agencies’ ability to interpret regulations such as the Clean Air Act. Sen. Manchin reintroduced a permitting reform package to speed up energy, infrastructure projects. In state news, California will require all medium and heavy duty trucks to be zero-emission by 2036. Massachusetts will set up a fourth round of bidding for offshore wind leases, aiming for 3.6GW of additional capacity.

The European Commission and the European Investment Bank announced €18B of financing to boost investment in climate action, clean energy, and connectivity in Europe’s partner countries around the world. EU MEPs agreed to tougher rules to tackle waste in fashion and also vote to set binding 2030 energy sector methane emission reduction targets by 2025. 

Elsewhere, COP28 President Al Jaber called for the end of fossil fuel emissions, leaving room to burn more oil and gas, focusing instead on boosting investment in carbon capture technology. India and China proposed to insert the phrase “multiple energy pathways” in a G20 communique to be released in Sept that would let countries choose a roadmap to cut carbon emissions instead of setting deadline to end fossil fuels. Record renewables output in Australia is lowering energy costs; its oldest coal plant is shutting down as the country pivots to clean energy.

Social & Governance

Efforts to govern the proliferation of AI technology in focus, as the UK's CMA launched a review of the AI market in part to assess consumer protection "guardrails." Google, Microsoft, OpenAI, and Anthropic CEOs were invited to White House to discuss key AI issues. IBM announced a pause on hiring for roles that could potentially be replaced with AI in the coming years. Norway's oil fund called for state regulation on AI and will set guidelines for how owned firms should use AI "ethically.” Microsoft’s Chief Economist warned of AI danger due to potential misuse by bad actors that could cause “real damage.”

Shareholders continue to pressure corporates on climate as TotalEnergies recommended rejection of resolution calling for Scope 3 targets and filed suit against Greenpeace over report claiming it underestimated its 2029 GHG emissions. Woodside directors maintained their seats despite criticism by activist groups and investors over climate strategy. BP staved off climate rebellion as shareholders backed targets and its chair keeps his seat; climate protestors disrupted the AGM over watered-down climate commitments.

This blog post is for informational purposes only. The information contained in this blog post is not legal, tax, or investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.